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Does Oil Price Fluctuation Affect Stock Market Returns in Nigeria?

Author

Listed:
  • Kenneth Chikezie Anyalechi

    (Retail Businesses, First Bank of Nigeria Ltd., Nigeria)

  • Hillary Chijindu Ezeaku

    (Department of Banking and Finance, Caritas University, Enugu, Nigeria,)

  • Josaphat. U. J. Onwumere

    (Department of Banking and Finance, University of Nigeria Enugu Campus, Enugu, Nigeria,)

  • E. J. Okereke

    (Department of Banking and Finance, University of Port Harcourt, Choba, Rivers State, Nigeria)

Abstract

This paper examined the responsiveness of the stock market returns to fluctuation in oil price in Nigeria using monthly dataset from January 1994 to December 2016. The autoregressive distributed lag estimation technique was applied to analyze the long-run model as well as the short-run dynamics whereas test for cointegarating relationships was conducted using the Bound testing method. The findings revealed that changes in oil price have had positive but insignificant impact on stock market returns both in the long-run and the short-run. Impact of inflation was positive and insignificant in the long-run but positively significant in the short-run. Real interest rate and log of exchange rate exerted negative influence on the stock market returns, where the short-run effect of real interest rate was significant, the long-run impact was found to be insignificant. The error term indicates that deviation from long-run equilibrium is corrected at the speed of 8.2% on annual basis. The Bound test result showed that no long-run relationships exist between the oil price and stock market returns during the period under study.

Suggested Citation

  • Kenneth Chikezie Anyalechi & Hillary Chijindu Ezeaku & Josaphat. U. J. Onwumere & E. J. Okereke, 2019. "Does Oil Price Fluctuation Affect Stock Market Returns in Nigeria?," International Journal of Energy Economics and Policy, Econjournals, vol. 9(1), pages 194-199.
    • Handle: RePEc:eco:journ2:2019-01-24
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    References listed on IDEAS

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    Cited by:

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    3. Henry Inegbedion & Eseosa Obadiaru & Olamide Adeyemi, 2020. "Stock Prices Reaction to Oil Price Fluctuations: Empirical Evidence from Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 142-149.
    4. Imangulu Muradzada & Nurkhodza Akbulev, 2023. "Empirical Analysis of the Relationship between Basic Energy Sources and the Tourism Sector Index," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 513-521, July.
    5. Hani El-Chaarani, 2019. "The Impact of Oil Prices on Stocks Markets: New Evidence During and After the Arab Spring in Gulf Cooperation Council Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 214-223.
    6. Seyedeh Fatemeh Razmi & Leila Torki & Seyed Mohammad Javad Razmi & Ehsan Mohaghegh Dowlatabadi, 2022. "The Indirect Effects of Oil Price on Consumption through Assets," International Journal of Energy Economics and Policy, Econjournals, vol. 12(1), pages 236-242.
    7. Muhammad Syafii Antonio & Aam S. Rusydiana & Wahyu Sugeng Imam Soeparno & Lina Nugraha Rani & Wahyu Ario Pratomo & Abdillah Arif Nasution, 2021. "The Impact of Oil Price and Other Macroeconomic Variables on The Islamic and Conventional Stock Index in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(5), pages 418-424.
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    9. Nurkhodzha Akbulaev & Imangulu Muradzada & Ziyadhan Hasanov, 2023. "Relationship between Oil Prices and Russia Exchange Indices: Analysis of Frequency Causality," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 607-615, September.
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    More about this item

    Keywords

    Stock Market Returns; Oil Price; Autoregressive Distributed Lag; Bound Testing;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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